Microsoft buys Nokia’s phone business for $7.1 billion

Microsoft and Nokia announced today that Nokia's Devices & Services business—the part of the company that builds all Nokia's phones (both smart and otherwise)—is changing hands. Microsoft is paying €5.44 billion ($7.17 billion) for the struggling Nokia division. The deal, subject to shareholder and regulatory approval, is expected to close in the first quarter of 2014.

In the transaction, all of Nokia's device business, including design, manufacturing, sales, marketing, and support, becomes a part of Microsoft. This includes 32,000 staff, of which 4,700 are in Finland.

Remaining behind is Nokia Solutions and Networks (formerly Nokia Siemens Networks), which builds telecommunications equipment and mapping division HERE (Navteq). Nokia is also retaining its Advanced Technologies group, which develops and licenses intellectual property. These parts together account for about half of Nokia's revenue and approximately 24,000 staff.

Nokia CEO Stephen Elop—formerly of Microsoft—will be succeeded as Nokia CEO by Risto Siilasmaa. Elop will serve as Executive Vice President of Devices & Services, and Nokia expects that he will move to Microsoft once the deal is closed.

The headline €5.44 billion figure is split €3.79 billion ($4.99 billion) for Devices & Services and €1.65 billion ($2.17 billion) for a patent agreement. Under that agreement, Redmond is buying a ten-year license to Nokia's patents, with an option to make the ten-year agreement perpetual. Microsoft is also acquiring Nokia's various licenses to patents from Qualcomm, IBM, Motorola Mobility, and Motorola Solutions.

Additionally, and not as part of this transaction, Microsoft is licensing the HERE platform for four years. For HERE, this will substantially replace the internal cross-billing that currently occurs, and Microsoft will become one of HERE's top three customers.

Finally, Microsoft is obtaining a limited license to Nokia's brand names. The Lumia (smartphone) and Asha (featurephone) brands move to Microsoft. Redmond can continue to use the Nokia brand on all current products and can also use it for ten years on any products based on Nokia's Series 30 and Series 40 featurephone platforms. However, it appears that future smartphones will not be permitted to carry the Nokia brand.

Microsoft says that it will continue to license Windows Phone to other OEMs.

Redmond says that with the purchase, its gross margin on each Nokia phone will grow from less than $10 per unit to more than $40 per unit, with "synergies" saving about $600 million in costs each year, and that the deal should start contributing positively to earnings per share by the 2016 financial year. The deal will be financed with offshore cash (just as happened with the Skype purchase).

366 Reader Comments

Well, that's official then: every single company that could have been considered a market or technology leader in the mobile field at the time of the iPhone's introduction and Android's launch is either roadkill (Danger, Motorola, RIM, Nokia, HTC, Palm) or... is Microsoft. And the jury is very much still out on MSFT in the long run, even with this acquisition.

The Asha takeover is pretty interesting too. I wonder if MS will develop a super lightweight version of WP for feature phones?

I think that's unlikely.

Nokia's feature phone business still had value, but I expect Microsoft only bought it because all of Nokia's handset business had to stay together due to patent licenses. If Microsoft only bought the Lumia line, Qualcomm and the rest would be lining up to sue whichever company didn't get the paperwork as part of the deal.

The Asha takeover is pretty interesting too. I wonder if MS will develop a super lightweight version of WP for feature phones?

I think that's unlikely.

Nokia's feature phone business still had value, but I expect Microsoft only bought it because all of Nokia's handset business had to stay together due to patent licenses. If Microsoft only bought the Lumia line, Qualcomm and the rest would be lining up to sue whichever company didn't get the paperwork as part of the deal.

So will MS still sell the feature phones and the Asha line or discontinue them outright? Aren't they selling decently in the developing world? I'm sure MS execs are salivating at the possibility to push Exchange and Bing Maps on billions of 2G phones...

Well, that's official then: every single company that could have been considered a market or technology leader in the mobile field at the time of the iPhone's introduction and Android's launch is either roadkill (Danger, Motorola, RIM, Nokia, HTC, Palm) or... is Microsoft. And the jury is very much still out on MSFT in the long run, even with this acquisition.

Well played, Apple/Google/Samsung. Well played.

Microsoft bought Danger, by the way, though Danger is unlike the others. Danger never built their own hardware.

I'd just love to read the board-room minutes, or much better, to see a video or hear an audio recording of the board-room meetings that preceded this decision... And to compare those minutes with the minutes of the meetings where they decided to cancel Meego etc. and become exclusively a purveyor of MS Windows Phone devices.

While this was not totally unexpected, it's hard not to say "holy moly..."

The Finns are probably not taking it too well, as a matter of national pride. Next up: RIM and Canada

This could well be very accurate. Google bought the moto phone division for various reasons, including their patent portfolio. Given Redmonds' propensity for using patents in... Various ways... Acquisition of BlackBerry by Microsoft might make sense. MS would then have the option of striping BB10 for parts and including them in a future WP iteration.

Not in any way saying that this would be a good thing but I'm sure someone on the MS board has thought of it.

As far as the Nokia acquisition is concerned, I'm barely surprised. Their consumer phone division has been on its last legs for quite some time. I'm sure MS view this as anoopportunity to bring everything in-house in a similar fashion to Apple. Makes sense from certain perspectives - no more update issues, total control over specs and features, tighter integration of software & hardware etc. I suppose we'll have to see where WP smartphones go from here. Interesting times...

The Asha takeover is pretty interesting too. I wonder if MS will develop a super lightweight version of WP for feature phones?

I think that's unlikely.

Nokia's feature phone business still had value, but I expect Microsoft only bought it because all of Nokia's handset business had to stay together due to patent licenses. If Microsoft only bought the Lumia line, Qualcomm and the rest would be lining up to sue whichever company didn't get the paperwork as part of the deal.

So will MS still sell the feature phones and the Asha line or discontinue them outright? Aren't they selling decently in the developing world? I'm sure MS execs are salivating at the possibility to push Exchange and Bing Maps on billions of 2G phones...

Bings does not make them money just like Google maps does not make Google money either, its just a nice plus. Exchange only works in the first world for companies and enterprise, I don´t think the third world has money to pay for exchange services, not at least unless Microsoft brings back Small business server and similar products for smaller business.

Stephen Elop ascends to CEO role at MS after they close the acquisition in April Seems to me Ballmer's exit was far from unplanned as it seemed when the news came out; first Value Act and now Nokia.WindowsPhone has momentum in most markets outside the US where they don't have to deal with a saturated market. They are a credible number 3 and have the ability to go number 2. They will never beat Android as an ecosystem but this was never about Android as a monolithic entity. The new MS phones will provide a place for Bing on millions of devices and consequently ad revenue. It provides access to local data across the world (which they lack today). To succeed, they just have to be a strong competitor to Samsung, the largest Android vendor. MS has the resources to play a long game like they did with Xbox, SQL Server, Azure and a hundred other things.

we all new Elop was a trojan horse... hope microsoft doesnt screw Nokia (i mean, the part they purchased) with they way to do things. they should remain with some indepence, otherwise i feel we will stop to see phones that show nokia legacy in them.

Obviously, stack ranking will immediately be implemented, in order to boost morale.

I don't expect major regulatory obstruction considering Microsofts position in mobile, but there is significant animosity toward them in some EU circles, so it'll be interesting to see how that plays out.Can they be forced to keep the European divisions running? (not that I expect them to close those down specifically, but maybe a symbolic gesture like that would satisfy the powers that be).

Edit: I wonder if the people who brought Elop in was planning /hoping for this outcome all along.

we all new Elop was a trojan horse... hope microsoft doesnt screw Nokia (i mean, the part they purchased) with they way to do things. they should remain with some indepence, otherwise i feel we will stop to see phones that show nokia legacy in them.

Obviously, stack ranking will immediately be implemented, in order to boost morale.

I see the design team quitting regardless of that within the next weeks. So it won't really matter. Microsoft just screwed themselves out of $7.1 billion.

Why? You think animosity toward Microsoft is more powerful than a monthly paycheck?

we all new Elop was a trojan horse... hope microsoft doesnt screw Nokia (i mean, the part they purchased) with they way to do things. they should remain with some indepence, otherwise i feel we will stop to see phones that show nokia legacy in them.

Obviously, stack ranking will immediately be implemented, in order to boost morale.

I see the design team quitting regardless of that within the next weeks. So it won't really matter. Microsoft just screwed themselves out of $7.1 billion.

People need a job to feed themselves. This an industry where few major players remain and who eventually dip into the same talent pool. Google cannot employ everyone on their payroll. Few will quit for sure but then few others will leave Google too.

I wonder if the people who brought Elop in was planning /hoping for this outcome all along.

Like all good conspiracy theories, this is impossible to prove or disprove.

It might have been a hidden agenda (unlikely), or it just started making more sense as they went along, perhaps because Nokia became too successful as a Windows Phone vendor, and the others started flagging.

I could see one good thing potentially coming out of this: better integration of Skype in Nokia phones. Assuming it's even a good thing.

And there goes the Nokia brand... We'll see how this works out might be good but at least where I work people have been a lot more interested in my Lumia 920 because its been a Nokia, if it now start saying Microsoft well not sure that'll sell more phones...

plus I agree wholeheartedly with "Microsoft now owns both software and the most popular WP hardware, who is going to compete with WP now?" I'm guessing they are trying for an Apple approach to building stuff.. But I'm really unsure they can pull it of...

And well at least I got the feeling it's Steven Elops "fault" that Nokia is selling out, might be wrong but it kinda looks bad on paper.... Oh well let's hope it works out because I love my Lumia....

Well, that's official then: every single company that could have been considered a market or technology leader in the mobile field at the time of the iPhone's introduction and Android's launch is either roadkill (Danger, Motorola, RIM, Nokia, HTC, Palm) or... is Microsoft. And the jury is very much still out on MSFT in the long run, even with this acquisition.

Well played, Apple/Google/Samsung. Well played.

I would not think the above 3 players will necessarily have that long in the sun...

For Samsung at least they got outsold by Xiaomi in high smartphones in China through first half of this year. Google's purchase of Motorola has not yet sparked sales much(roughly only ~1millions units per quarter well out of top 10). Finally Apple seems to be having problems selling a high proportion of old models compared to new models, to expand sales hey are having to sell to budget minded customers, the original high value customers already all now have iPhones.

Is surprising this takeover went through. Was stories 3-4 months ago that talks had been aborted. Will be interesting to find out who moved position from last time ie Nokia accepted less money or Microsoft realized that with 85% of the windows phone market it was essential Nokia keep selling only Windows Mobile smartphones.

Also surprising considering current MS CEO just resigned, this deal has obviously been in process for some time hard to not think the 2 events are related.

Finally is funny Elop is being speculated as a Ballmer replacement - first time as CEO he sold off Macromedia, 2nd time as CEO he sold off Nokia, now question must be asked for the 3rd time as CEO, who is he going to sell Microsoft to?

Finally is funny Elop is being speculated as a Ballmer replacement - first time as CEO he sold off Macromedia, 2nd time as CEO he sold off Nokia, now question must be asked for the 3rd time as CEO, who is he going to sell Microsoft to?

I'm pretty much floored at the moment, and will have to sleep on this to say the least. I mean, wow, its something thats been rumored/speculated for a while, but its actually happened. Nokia has acted more like the owner of Windows Phone than Microsoft itself, I think, so I'm hoping they're the ones who will keep the platform moving forward.

I absolutely love my Lumia 900, and the only reason I've been wanting to upgrade is the 1020's ridiculous camera. That's pretty impressive - shouldn't I be having the upgrade itch by this point, regardless? Its been fantastic...

I wonder if the people who brought Elop in was planning /hoping for this outcome all along.

Like all good conspiracy theories, this is impossible to prove or disprove.

It might have been a hidden agenda (unlikely), or it just started making more sense as they went along, perhaps because Nokia became too successful as a Windows Phone vendor, and the others started flagging.

I could see one good thing potentially coming out of this: better integration of Skype in Nokia phones. Assuming it's even a good thing.

Wait, that is not a conspiracy theory anymore. It has happened. Skype was very well integrated in Maemo and Symbian. Nokia story is sad. I have a N900 and an E7, both of which are awesome phones. There are no replacement for those 5 year old phones on the market.

I was preparing my self to buy shares in nokia this week. I've been thinking about it for months now . I'm new to all of this. Can anyone please tell me whether i got screwed by waiting or avoided a disaster?

So, officially, there's no more Nokia phones. Basically there's no more Nokia as well. There's only Microsoft. :-)

I guess Elop was going for this from the start, secure broad patent portfolio and recognizable trademarks for cheap.

The only thing I don't know is if WP are selling or not. I live in Europe and I haven't seen many people with Windows phones. On the other hand Microsoft makes more money out of the Android manufacturers and they also have everyone by the balls to make windows phones. It's definitely smart game, but very dirty.

I guess some things never change and Microsoft will never stop playing dirty.

So, officially, there's no more Nokia phones. Basically there's no more Nokia as well. There's only Microsoft. :-)

I guess Elop was going for this from the start, secure broad patent portfolio and recognizable trademarks for cheap.

The only thing I don't know is if WP are selling or not. I live in Europe and I haven't seen many people with Windows phones. On the other hand Microsoft makes more money out of the Android manufacturers and they also have everyone by the balls to make windows phones. It's definitely smart game, but very dirty.

I guess some things never change and Microsoft will never stop playing dirty.

Nokia Corporation board approved Elop as CEO. Last I checked they are Finnish and Ballmer had no power in the decision.

No surprises here... the writing was on the wall when MS "partnered" with Nokia a while back. If only Nokia had listened to users and gone Android instead of hitching to MS crapware, they might have stood a chance.

I predicted this move more than two years ago.What makesme angry is what Microsoft already did to Nokia.It's a piece of technology history that crumbled in the greedy hands of Microsoft.As an European fellow, I'm angry, disappointed and sad by this turn of events.I always had the hope that shareholders could have the strenght to give Elop the boot.

I was preparing my self to buy shares in nokia this week. I've been thinking about it for months now . I'm new to all of this. Can anyone please tell me whether i got screwed by waiting or avoided a disaster?

Um, you got screwed by waiting. The stock price has pretty much only been going down the last five years.

No surprises here... the writing was on the wall when MS "partnered" with Nokia a while back. If only Nokia had listened to users and gone Android instead of hitching to MS crapware, they might have stood a chance.